It's been nearly eight months since a high-priced madam begged a judge to let her sell her shares of Dolby Labs (NYSE:DLB), presumably because they were fully valued.

Wags and wits had a field day with the market's reaction to a prostitute's prognostications on intrinsic value. Shares of the sound-technology leader fizzled faster than a Steven Seagal film at the box office. Even Jim Cramer was incredulous about the effects the "D.C. Madam" was able to impose on Dolby and thought investors were crazy to cash out of the three-time Motley Fool Stock Advisor recommendation. Shares dropped 10% on the news, and then they drifted an additional 12% lower over the ensuing two months.

Now, with Dolby's first quarter of the new fiscal year drawing to a close, we see just how far onto the wrong side of the street the madam was walking, and how ludicrous it was that anyone paid her any mind.

Analysts are forecasting revenue of $135 million, 29% better than what the company posted last year. Earnings are also expected to rise by about 18%, but importantly, those same analysts have been steadily increasing their estimates. And they're probably wrong anyway. Dolby has surpassed analyst expectations for the past four quarters by 35%, on average.

While Dolby faces nominal competition from DTS (NASDAQ:DTSI), SRS Labs (NASDAQ:SRSL), and Q Sound Labs (NASDAQ:QSND), its market dominance is represented by having nearly five times the revenue of all of them combined. It's also considered to have the leading technology for all of the next-generation advances we will see in consumer products.

Televisions have had to incorporate advanced tuners since the beginning of the year, and those tuners have included Dolby's technology. Dolby also offers the must-have sound technology in DVD players -- in both stand-alone units and PCs -- and the Vista operating system from Microsoft (NASDAQ:MSFT) incorporates it as well. Revenue from Vista sales helped Dolby increase its earnings by 75% last quarter.

Its recent acquisition of Coding Technologies allows Dolby to offer audio-compression techniques in mobile and digital broadcasts -- techniques that are also being adopted for broadband TV, mobile TV, video-on-demand, and next-generation HD broadcasts.

At nearly 30 times forward earnings, Dolby is not the same discounted value that it was when the madam made her move to unload her stock. Yet it's also true that analysts of all types -- on the dark streets and on Wall Street -- have not been successful at predicting Dolby's future. Just by beating estimates by 25% next year, Dolby falls to the same valuation range it was at when the market thought the madam had the goods on it.

Since May, the sound-technology leader has appreciated in value by more than 50%, a return on value even Steven Seagal would surely give up his ponytail to achieve.